Premium Subsidies And Cost-Sharing Subsidies

This post was originally published in October 2013, but was updated with additional information in November 2015.

One of the primary goals of the ACA was to make health insurance more accessible to more people.  This was accomplished with a variety of reforms impacting the individual health insurance market (which had historically not been regulated as much as the group market), along with subsidies to help people pay for their health insurance and lower their out-of-pocket expenses.

health insurance subsidiesGuaranteed issue individual health insurance means that you no longer have to go through medical underwriting to get an individual health insurance policy.  Your medical history is no longer be a factor in determining whether you can get a policy or what your premium will be.

But the law also provides financial assistance for individuals and families who need it the most.  You have to purchase your policy through Connect for Health Colorado (the Colorado marketplace, sometimes referred to as the “exchange”) in order to get any type of subsidy.  Our brokerage is certified to assist you with this process, but it’s important that you’re aware that “off exchange” plans are not eligible for subsidies.

How to calculate ACA MAGI or “household income” for subsidies

There are two types of financial subsidies available:  “Advanced Premium Tax Credit” (APTC) – Premium subsidies and cost-sharing subsidies.  Much more detailed information is available about the subsidies if you follow those links, but here’s a brief summary of each one:

Premium Subsidies

Advanced Premium Tax Credit Subsidies are available to anyone who has an income between 133% of federal poverty level (FPL) and 400% of FPL, although on the upper end you may find that the coverage is already within the range defined as “affordable” under the ACA, and subsidies might not be available (read more about how this works). Colorado has opted to expand Medicaid to people with incomes below 133% of FPL, which is why the premium subsidies do not extend to incomes below that level.  This is a helpful chart that combines incomes and family size so you can see where you are in terms of percentage of FPL (note that the 2015 poverty level guidelines will be used to determine subsidy eligibility for all plans with 2016 effective dates, since the 2016 open enrollment period begins in 2015).

Connect for Health Colorado enrollees who qualified for premium subsidies in 2015 received an average subsidy of $230/month.

The premium subsidies are on a sliding scale, with the most assistance provided to individuals and families in the lowest income ranges.  If your income is between 300% and 400% FPL, your subsidy in 2016 is based on capping your premium at no more than 9.66% of your income.  Lower incomes Premium and Cost-Sharing subsidies available through the Connect for Health Colorado Exchange Marketplacehave lower caps (more details here).  Your subsidy amount is calculated based on the cost of the second-lowest price Silver plan, but once your subsidy amount has been determined, you can choose to purchase any “metal” plan offered at Connect for Health Colorado and have the subsidy applied to the price.  So you can get a bronze plan and pay even less than the capped amount, or you can get a gold plan and pay more… it’s up to you.  Be aware that “catastrophic” plans available for people under 30 are not eligible for subsidies, even if you purchase them within Connect for Health Colorado.  If you’re a 20-something enrollee who qualifies for a subsidy, you’ll probably be better off with at least a bronze plan instead of a catastrophic plan, simply because of the subsidy availability.

If you are eligible, you may choose to have some or all of the tax credit paid directly to your insurance carrier to reduce your premium payment. You may choose to use the entire amount right away, some of it right away or wait until you file your taxes to claim the tax credit. One reason to take less than the total amount is if you think your income will go up during the year. The tax credit you receive cannot be higher than the premium for your health plan and cannot be paid directly to you on a monthly basis.

Premium subsidies are a tax credit, so they have to be reconciled with the IRS when you file your taxes.  The law allows you to have the credit paid directly to your health insurance carrier each month, in order to reduce the amount that you owe in premiums.  But when you file your taxes, if your income is higher than you projected when you applied for coverage, you may have to pay back a portion of your subsidy.  On the other hand, if your income is lower than projected and you’re eligible for a higher subsidy, you’ll get the additional amount as a regular tax credit when you file your taxes.  If your income changes during the year, it’s important to communicate with Connect for Health Colorado so that they can adjust your subsidy and you can avoid headaches at tax time.

If your gross household income (before taxes and other deductions are taken out) is at or below what is listed in the table below for 133% of FPL (the limits are higher for children to qualify for Medicaid and CHIP), or if you are pregnant or disabled, you may qualify for free or low cost state medical coverage through Medicaid or Child Health Plan Plus (CHP+). Subsidies are available up to 400% of FPL (depending on the unsubsidized cost of the plan), and subsidies to lower the out-of-pocket costs for a Silver plan are available for applicants with income up to 250% of FPL.

The Federal Poverty Guidelines Help to Determine Subsidies

People earning between 138% and 400% of the federal poverty guidelines can receive help in paying for their insurance. See if you qualify based on your expected income and household size using the cart below.

This chart has been updated to reflect the 2015 federal poverty guidelines.  These numbers will apply for subsidy calculations throughout the entire 2016 open enrollment period and all of 2016 for people who enroll later in the year due to qualifying events.  Medicaid eligibility for 2016 will switch to using the 2016 federal poverty guidelines as soon as those numbers are released in early 2016.

 Household Size

 100%

 133%

 150%

200%

250%

 300%

400%

 1

$11,770

$15,654

$17,655

$23,540

$29,425

$35,310

$47,080

 2

15,930

 21,187

23,895

  31,860

39,825

47,790

63,720

 3

20,090

 26,720

30,135

  40,180

50,225

60,270

80,360

 4

24,250

 32,253

36,375

  48,500

60,625

72,750

97,000

 5

28,410

 37,785

42,615

  56,820

71,025

85,230

113,640

 6

32,570

 43,318

48,855

  65,140

81,425

97,710

130,280

 7

36,730

 48,851

55,095

  73,460

91,825

110,190

146,920

 8

40,890

 54,384

61,335

  81,780

102,225

122,670

163,560

 

Cost-Sharing Subsidies

Cost-Sharing Subsidies are the second type of financial assistance available at Connect for Health Colorado.  

Cost-sharing subsidies are only available on silver plans

There are two types of cost-sharing subsidies, and they work together to make coverage more robust and out-of-pocket costs lower. In both cases, they apply to anyone with an income up to 250% of FPL, as long as a Silver plan is selected. If you’re eligible for cost-sharing subsidies, they’ll already be included in the plan details for all the Silver plans available through Connect for Health Colorado. More details are here, but this is a brief summary:

  • The first cost-sharing subsidy reduces the maximum out-of-pocket exposure on silver plans for households with incomes up to 250% of FPL. For 2016, the unsubsidized out-of-pocket maximum for an individual is $6,850 ($13,700 for a family). But enrollees with incomes up to 250% of FPL will be able to select Silver plans with lower out-of-pocket limits: For enrollees with income between 100 and 200 percent of poverty level, the subsidized Silver plans have a maximum out of pocket of $2,250 ($4,500 for a family). Enrollees whose income is between 200 and 250 percent of poverty level will have a maximum out-of-pocket of $5,450 ($10,900 for a family) on Silver plans.
  • The second type of cost-sharing subsidy increases the percentage of costs that are paid by the health insurance policy.  It’s also on a sliding scale. An unsubsidized silver plan pays roughly 70% of the average enrollee’s total health care costs (this percentage is called actuarial value, or AV). For applicants with income between 138% and 150% of FPL, Silver plans have an AV of 94%, which is better than a Platinum plan. For applicants with income betwen 150% and 200% of FPL, Silver plans have an AV of 87%, which is nearly as good as a Platinum plan. And for applicants with an income between 200% and 250% of FPL, Silver plans have an AV of 73%.

If you have questions about subsidy eligibility, please let us know.  As always, there is no cost for our services.  We’re happy to help you find the best policy to meet your needs, whether it’s in the Connect for Health Colorado marketplace or not.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP.

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